Servive Tax On Rent-Cab-Motor Operator, Service Tax

[VAMSI KRISHNA]

Sir,

'ABC Ltd' is a seven star deluxe hotel (Providing accomidation as well as food). 'B' is a customer who check in hotel. 'B' whants to go outside for to attened a meeting which is 200 kms from hotel. 'B' asked hotel to arrange transportation for the same. 'ABC Ltd' does not having any owned cabs so they approched 'C' for to arrange the cab (Car). 'C' sent the car to hotel and 'B' attended meeting and come back to hotel. 'B' not paid any payment to 'C'. 'C' billed to 'ABC Ltd' and 'ABC Ltd' billed to 'B'.

Now my Doubt is???

1) if 'C' is individual.... as per 68(2) of finance act 1994.. who is going to liable to pay tax ??????

2) whether we can treat 'ABC Ltd' as a rent a cab operator for applicability of 68(2)??

Posts / Replies

[Himansu Sha]

Here the complementary provisions created by the hotel for the guest. The hotel will pay the service tax on reverse charge basis. This usually happens

[KASTURI SETHI]

Dear Querist,. This service is covered under 'Declared Service' specified under Section 66 E(f) of the Finance Act and also read para no.6.6.2 of an Education Guide dated 20.6.12 issued by Board. Serial no. of Table refers.RCM is not applicable.

[KASTURI SETHI]

C is service provider. B is out of picture. ABC is Service Receiver. A will collect ST from you and deposit with Govt under Section 68 (1) and not 68 (2). No abatement. Answer to your second Query is NO.

[VAMSI KRISHNA]

Respected KASTURI SETHI Ji,

Would you please forward link for aforesaid 'Educational guide issued board'.

Thanks

[KASTURI SETHI]

cbec.gov.in. It is Board's site. Type education guide of CBEC on Google. You can easily trace out.

[VAMSI KRISHNA]

Respected KASTURI SETHI Ji,

am gone through aforesaid educational guide issued by board. para no as specifed earlier is pertaining to Whether the transactions involve transfer of right to use goods (Declared services or not) ?? but my doubt is who is going to liable to pay tax????

Thanks

[KASTURI SETHI]

Dear Querist,

Have you read serial no.1 of Table given in Board's Circular ? Liability is on C after collecting ST from ABC Ltd.

[VAMSI KRISHNA]

Sir,

As per Notification No. 30/2012-Service Tax dated 20-06-2012, serial no 7 ( in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers ), made liable service receiver should have to discharge the service tax liability if following conditions are satisfied.....

1) service provider is any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory

2) service receiver is business entity registered as body corporate, located in the taxable territory;

3) one more condition is service receiver is should not be in similar lie of business.

Coming to my question....

Service provider is an individual (Condition 1 satisfied), Service receiver is body corporate (Company)( Condition 2 is satisfied), Am unable to deceide whether this hotel is in similar line of business or not because of he is providing service of rent a cab also in addition to hotel accomidation.

My view 1 : Hotel should be treat as a service provider of rent a cab because of hotel providing this service not to all customers. Hotel providing this service to only those customers who are asked them to facilitate. so by treating hotel as rent a cab operator hotel is in similar line of business so reverse charge mechanisum is not applicable.

My view 2: Hotel should not be consider as a rent a cab operator. because of hotel service is primary service and all those rent a cab are incidental in nature. so hotel is liable in reverse charge mechanisum since all those three conditions are satisfied.

Which view of mine is correct....

Thanks in advance for your reply.

[Rajagopalan Ranganathan]

Sir,

As per Notification No.30/2012-ST dated 20.6.2012 as amended in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers, the service tax is payable 100% by service receiver (ABC Limited) if the service tax is paid on 40% of the gross value charged by the service provider 'C' subject to the following conditions, namely-

[(i) CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004;

(ii) CENVAT credit on input service of renting of motorcab has been taken under the provisions of the CENVAT Credit Rules, 2004, in the following manner:

(a) Full CENVAT credit of such input service received from a person who is paying service tax on forty percent of the value; or

(b) Up to forty percent CENVAT credit of such input service received from a person who is paying service tax on full value;

(iii) CENVAT credit on input services other than those specified in (ii) above, has not been taken under the provisions of the CENVAT Credit Rules, 2004.

If you opt for payment of service tax without abatement then 50% of the service tax by is to be paid by service provider ('C') and 50% service tax is to be paid by service receiver (ABC Ltd.). If the total turnover of the service provider ('C') did not exceed the limit of ₹ 10 lakhs during previous financial year he is not liable to pay service tax. However the service receiver (ABC Ltd.) has to pay the remaining 50% since small scale exemption is not applicable to service receiver.

[VAMSI KRISHNA]

Dear experts,

My Doubts is how to treat 'ABC Ltd' in the above situation. (That to service provided by 'C' to 'ABC Ltd')

1) Treat 'ABC Ltd' as rent a cab operator then Reverse charge mechanisum is not applicable....

2) Treat 'ABC Ltd' as Hotel industry then Reverse charge mechanisum is applicable...

Thanks

[Rajagopalan Ranganathan]

Sir,

ABC ltd. is hotel industry and not rent a cab operator. Hence he has to pay service tax under reverse charge mechanism.

[VAMSI KRISHNA]

Respected Rajagopalan Ranganathan Ji,

if 'ABC Ltd' treated as a hotel industry then 'ABC Ltd' is liable under reverse charge mechanisum. Whether the amount of service tax (which is paid under Reverse charge mechanisum) is eligible for CENVAT credit to 'ABC Ltd'?????????

Thanks

[Ramaswamy S]

The Hotel engages the services of the cab operator. The hotel is the service receiver and hotel to pay the service tax on RCM.

[Himansu Sha]

If I can give a view, the input service credit is not available. Board has issued a circular in this regard

[Ganeshan Kalyani]

ABC has arranged the cab but the service was actually availed by B. Since C has provided cab to ABC who did not availed the service but provided to B the service is not of the nature of rent a cab service. C is liable to collect tax from ABC and pay to the government. I go with Sri Kasturi Sir views.Thanks.

[YAGAY AND SUN]

Education Guide is just for educational purpose and it has no legal sanctity.

[KASTURI SETHI]

Extract of an education guide :-

6.6.2 Whether the transactions listed in column 1 of the table below involve transfer of right to use goods?

S.No.	Nature of transaction	Whether transaction involves transfer of right to use
1.	A car is given in hire by a person to a company along with a driver on payment of charges on per month/mileage basis	Right to use is not transferred as the car owner retains the permissions and licenses relating to the cab. Therefore possession and effective control remains with the owner (Delhi High Court Judgment in the case of International Travel House  2009 (9) TMI 879 - DELHI HIGH COURT in Sales Tax Appeal No 10/2009 refers). The service is, therefore covered in the declared list entry.

 

[VAMSI KRISHNA]

Respected Himansu Sha Ji,

Lety me know the relevent circular no. (CENVAT credit not eligible) issued by the board...

Thanks

[VAMSI KRISHNA]

Respected KASTURI SETHI Ji,

My doubt is whether 'ABC Ltd' is to be treated as a rent a cab operator or Hotel operator for to deciede reverse charge mechanisum is applicable or not????? and CENVAT avaliability to 'ABC Ltd'????

Thanks

[Himansu Sha]

Circular no 943/04/2011-cx dated 29.04.12 point no 12

The hotel will pay the service tax as receiver of the service and will the service tax. The hotel gives the complimentary service to the customer. There is no doubt about it. Hotel will not get the credit.

[KASTURI SETHI]

Undoubtedly, education guide has no legal force but Board's Expert brain is behind this clarification/guidance. It is not by Tom, Dick and Harry.

[HARSHAD BHAMRE]

Dear Sir,

I go through the above discussion and found, some thing I am doing wrong for my case , please suggest me if I am wrong .

we are Private Limited Company .we did contract with vendor( proprietor) for transportation of employee. vendor is register in Service tax. he is not charging service tax on bill given below declaration. and we are providing Service tax 40% of bill amount under RCM is it correct or we are doing wrong.

Please Suggest

Harshad Bhamre

[HARSHAD BHAMRE]

We paid 40% service tax under RCM to the government on vendor bill. as he not charge service tax and given above declaration.

[VAMSI KRISHNA]

Respected HARSHAD BHAMRE ji,

To the best of my knowledge ..... creation of 40% tax under RCM in your case is valid only.....

if your business is also rent-a-cab operator then only RCM provisions not applicable......

Thanks

[KASTURI SETHI]

Sh.Harshad Bhamre Ji,

You are absolutely on the right track. Rightly paying Service Tax on the abated value i.e. 40%. Your firm is covered under serial no. 7(a) of Notification No.30/12-ST as amended.